 
A modern version of capitalism can generate a path of sustainable growth
Interview with Martin Lees, Secretary General of the Club of Rome
Published Saturday, January 9th, 2010 in the Sächsische Zeitung
Extracts:
About the consequences of the current financial crisis:
It was clear to many economists and officials before the financial crisis that the vast imbalances and vulnerabilities were unsustainable and would lead to a currency and financial crisis. Nobody could predict however, when this would happen. The world economy is a complex system on a vast scale and it is becoming increasingly difficult for governments or international financial institutions to manage. For this reason, there is now a serious concern to strengthen supervision and regulation and to redesign “the architecture” of the international financial system. The present financial crisis, triggered by irresponsible lending in several major economies, therefore impacted on a financial system which was already in a very vulnerable state.
About capitalism and economic growth:
In most Western economies we have achieved a balance between the role of the market and the role of government. We do not have the wild capitalism which was the focus of the work of Karl Marx. We know that we need the dynamics of the market to generate innovation and rising living standards. The people of the former DDR have experienced the consequences of an economic system where the dynamics of the market were absent. Each modern economy therefore must find the appropriate balance of the market with the role of government. In the case of Germany around 50% of the national economy is in the public sector and yet the economy is innovative and internationally competitive.
It is easy to talk of growth, but difficult to be clear what this means. The way growth is measured in national accounts largely ignores environmental consequences, the value of natural capital and ecosystem services and the interests of future generations. The central issue is whether we can find a path of growth which will increase the well-being and happiness of citizens, which is a different purpose from increasing the level of physical consumption. The path of growth is determined by economic and social choices, it can therefore be changed to improve the quality of life, while preserving a healthy and decent environment. Therefore, a modern version of capitalism can generate a path of sustainable growth.
About the need to redefine growth:
The whole of humanity, soon to be nine billion people, lives on our small and fragile planet. We are overusing drastically the resources of the planet leading to ecosystem degradation and increasing stress on food and water security for several billion people. The dilemma we face is that we need to generate investment and resources to meet the needs of the poor throughout the world without destroying the global environment. As the Club of Rome pointed out in 1972 in Limits to Growth, we cannot increase consumption, pollution and waste indefinitely on a finite planet. As I have said, we can choose a path of growth which is environmentally sustainable, which includes the poor in the benefits of progress, and which preserves a decent future for our children. The present path of global development is clearly unsustainable; we need to define a new path to balance the needs of humanity with the conservation of the global environment.
About stimulus programs:
The massive fiscal stimulus programs undertaken by governments across the world have averted the risk of a worldwide depression. In this respect, emergency action on this scale was necessary. However, one consequence of these programs is a massive rise in government debt which will ultimately have to be paid off.
As I have indicated, the pre-crisis path of the world economy was heading into massive problems in many respects – the risk of catastrophic climate change, the destruction of ecosystems, rising inequalities in wealth and income and rising levels of poverty and hunger, now affecting over one billion people. Many commentators pointed out that the financial crisis and the economic slowdown provide an opportunity to reconsider the direction of growth, combining environmental responsibility with economic recovery. Unfortunately, this opportunity has been largely lost and we are returning to business as usual in the banking sector and the economy.
About the debate of economic growth in Germany:
There is a debate in the German intellectual community around the issue of economic growth but I believe that most German citizens would wish to see a rapid recovery to the rate of growth and the level of employment which they have come to expect as normal. Germany has a remarkable system of social security which has greatly reduced the impact of the crisis, even on the unemployed. It is hard for me to judge but it seems that, for most Germans, the problem originated in the “Anglo-Saxon economies” as a result of market fundamentalism and irresponsible lending by banks and financial institutions. Many Germans are committed to making individual efforts to move towards sustainable lives, for the majority they expect to return to business as usual and carry on as before.
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